The government has launched another attempt to reform the country’s old age pension scheme to ensure sufficient funding and make up for an increasing number of beneficiaries as the ageing population grows.

Among the proposals mooted by Interior Minister Alain Berset is an increase in women’s retirement age to 65 – up from 64 – to bring it in line with that of men.

The aim is also to make the retirement age more flexible and encourage older people to stay in a job. Early retirement should be made less attractive.

Berset has come out in favour of increasing value-added tax to boost the finances of the state pension scheme.

The move would be fair and have good chances of winning a majority, he said. “There are no plans to lower pension payments,” he told a news conference on Wednesday.

The reform is to coincide with an overhaul of the occupational pension scheme, including lowering the conversion rate.

He added that the reform was crucial for citizens to know that the state pension system is solid and how much financial support they can expect to get.

Mixed reaction

Initial reaction from the main political parties to the cabinet decision was mixed.

The centre-left Social Democratic Party, which has been championing social security issues, has criticised plans for pushing back women’s retirement age and called for alternative options to secure the financing, including a scheme based on years spent in working life.

The rightwing Swiss People’s Party welcomed a plan to put women on a par with men when it comes to retirement. It wants the government to press ahead with a reform of the occupational pension scheme.

The centre-right Radicals said parts of the reform, including the higher retirement age for women, should be tackled quickly, while the centre-right Christian Democrats welcomed the planned reform as a step towards adapting the social security system to the needs of people in the 21st century.

Timing

In a first step, the interior ministry has been asked to present a detailed plan by next summer for cabinet to discuss. Parliament is to debate a draft bill in 2014 at the earliest before voters will have the final say on a constitutional amendment.

The reform could come into force by 2020.

Previous attempts to reform the main pillar of Switzerland’s social security system were thrown out by voters and by parliament in 2004 and 2010 respectively.

The old age pension scheme, funded jointly by employers and employees as well as taxes, was launched in 1948 and has undergone at least ten reforms.

Social security system

The state-old age pension scheme was introduced in 1948 and has undergone ten reforms.

It is one of the main tenets of Switzerland’s social security system and is often referred to as the first pillar of the old age provisions, which also include occupational pensions and personal savings.

The retirement age for men and women was initially set at 65. In 1964, women became eligible for retirement at 62 and in 1994 the age was raised to 64.

In 2004, voters rejected an increase in women’s retirement age to 65 and a hike in VAT. In 2008, a proposal to introduce a flexible retirement age without loss of benefits failed at the ballot box.

Funding and terms

The scheme is funded mainly through employee salary deductions and employers’ contributions.

Payments come from taxes on alcohol and tobacco as well as VAT. Cantons also contribute to the scheme.

The annual pensions in 2012 range between SFr13,920 and SFr27,840.

Employee contributions are mandatory from the age of 18 (21 for those without gainful employment) for all Swiss citizens and foreigners working for a Swiss company.

The rules apply also for Swiss citizens working for a Swiss company based abroad and for expatriates.

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